Written evidence submitted by DREM Ventures
Ltd, Optropreneurs Ltd, Pinacl Solutions UK Ltd and Grounded Innovation
Ltd (TIC 17)
1. INTRODUCTION
2. The Science and Technology Committee ("the
Committee") is exploring models to improve commercialisation
of research in the UK.
3. Based on the recommendations made in two reports
(one by James Dyson, one by Hermann Hauser), the Committee is
considering Technology and Innovation Centres ("TICs")
to facilitate and engage in technology transfer, thus enabling
effective and rapid transfer of ideas from the science base into
manufacturing. NOTE: We have adopted
Hauser's phrase "Technology and Innovation Centres"
because technology management and innovation are different activities.
4. The Hauser report takes the Fraunhofer model
as an example of good practice and strongly supports this model
for the UK. The Committee is examining this as a model for TICs
in the UK.
5. This submission addresses the issues in the
terms of reference, drawing on UK experience and the stated objective
of "improving commercialisation of research in the UK".
If the UK is to recover from the economic crisis, an effective
TIC network is vital to feed research into UK industry as quickly
as possible, while defining and managing risk with adroit management.
6. The terms of reference include examination
of other models that have been successful in the UK. This submission
presents a model we believe is better suited to the UK, and has
a successful track record. This is the business model that was
used to create and operate OpTIC Technium in St Asaph for the
first five years of its operation. We strongly urge the Committee
to examine this model in detail before making a final decision
on how the TICs should operate. NOTE:
Parliamentary Question 2009/1904 identified OpTIC in the context
of the TICs.
7. This submission is made by members of the
former management team of the OpTIC, and an independent consultant
who worked with the team.
8. OPTIC TECHNIUM
- AN INTRODUCTION
9. The OpTIC Technium ("OpTIC") was
created in 2003 as a result of an industry-led initiative aimed
to provide sustainable growth to an established, high technology,
industry cluster in North Wales and the North West. OpTIC was
a unique entity. Its main activity was to foster technology transfer
and technological innovation in the cluster. This is consistent
with one of Hauser's recommendations (number three).
10. The original plan was conceived in 1999 when
the Welsh Optoelectronics Forum ("WOF") initiated various
studies of "incubators" and best practice in knowledge
transfer across the UK and internationally. The Welsh Development
Agency ("WDA) adopted the plan, developed it further, and
in 2000 submitted a bid for ERDF funding under Objective 1. This
was approved in 2002 and the project resulted in two contracts.
The first for the OpTIC building began at the end of 2002, the
second, a five-year contract for the management of the business
started around a year later. Optropreneurs Limited operated the
OpTIC business from January 2004 to February 2009 (five years)
when the business was transferred to the new Glyndwr University.
11. OpTIC predates the Technium concept and was
different from other Techniums in that it was managed, from the
outset, by the private sector on a not-for-profit basis and designed
to become self-sustainable. OpTIC was a successful example of
public-private-partnership which operated with support from the
Welsh Assembly Government. Other Techniums were WDA "projects"
managed largely by WDA staff. Hauser makes the point about a strong
brand reinforcing a TIC network - a brand represents a set of
values and there were different values between OpTIC and elsewhere
in the Technium brand.
12. Since the transfer of OpTIC to Glyndwr University,
the management model has changed dramatically and the strategy
of OpTIC has altered very significantly. Consequently all references
to the OpTIC model in the following paragraphs will be in the
past tense.
13. A key driver of OpTIC's success was its links
with a wide range of partners (locally, regionally, nationally
and internationally), in both academic and non-academic fields.
OpTIC developed a spirit of collaboration between industry, academia,
the financial and legal professions, and public sector. Its purpose
was to generate new, high technology businesses, quality jobs
and to play a major role in sustaining and growing the existing
Welsh Optronic cluster in the region. The cluster's economic performance
and employment numbers grew at an impressive rate since the launch
of OpTIC: the revenues generated in the opto-electronics cluster
around St Asaph increased since 2002 by 37%. (WAG press release).
14. The business model for OpTIC was developed
on a thorough understanding of the actions necessary to manage
successful technology transfer. Among its objectives was to improve
the commercialisation of optoelectronics research in the UK.
15. OpTIC was conceived and operated in the technology
development space covered by Technology Readiness Levels ("TRLs")
2-8, which is a wider span than Hauser proposed for TICs: 3-8.
This was because it had both applied research being conducted
in the same environment as product development with incubation
companies.
16. Drawing on both the considerable management
experience available in the region, and on more general lessons
and best practice from two major consultancies, Scientific Generics
and Oxford Innovation, the team pioneered a technology incubation,
brokering, investment and management model that became OpTIC.
As Hauser recommended, OpTIC had a strong governance structure
providing strategic direction, as well as operating with a high
degree of autonomy. Although Optropreneurs was only initially
awarded a 5-year contract, the strategic direction was set over
a longer timescale. Hauser also makes the point that a ten-year
timescale is appropriate.
17. OpTIC comprised three key, inter-related
elements: a business centre, technology centre, and incubation
space, each of which was run as a profit centre by the experienced
Optropreneurs team who worked to generate a surplus on operations
for re-investment to maintain the leading-edge status of OpTIC.
18. The Business Centre - provided business support,
workshops and short courses for continuous professional development.
The building was used as an asset for events relevant to the UK
industry, and for providing hands-on management expertise into
the Incubation Centre, thus providing important cash flow in the
early days.
19. The Technology Centre - was designed to operate
as a world-class facility, performing leading edge product development,
research, contract research. Academic staff maintained their University
posts while providing support for development projects that had
been won by the management. Academic staff did not necessarily
have to be geographically close to OpTIC. The activities within
the Centre complemented work being carried out in academia and
provided a focal point for joint projects. The work in the Centre
did not compete with the R&D undertaken by the Universities
- in practice it made the "Third Mission" task easier
for those Universities that were involved. The operating model
was recognised by EPSRC as they established their first Integrated
Knowledge Centre (IKC) at OpTIC.
20. The Incubation Centre - provided accommodation
for up to 24 new start-up opto-electronics businesses coming from
either industry or academia. The business model for OpTIC did
not simply provide space to rent in the Incubation Centre: incubation
is an active process that needs to be managed. OpTIC would take
equity stakes in the incubation companies, thus providing close
involvement and support that came from the Optropreneurs management
team as well as appropriate external experts - including seed
capital funding experts.
21. Incubation Centre start-ups signed up to
a limited tenancy in OpTIC after which time they were encouraged
to seek larger premises to accommodate their expanding needs.
Incubation companies paid a market rent for the facilities and
could also procure other services and access to additional technological
resources within the Technology Centre. OpTIC allowed flexibility
in the use of these additional services by considering each company's
unique needs and whether services could be provided in exchange
for equity (a model that is also often seen in the TV programme
"Dragons' Den").
22. Evidence of success: In addition to
the delivery of the required "project outputs" OpTIC's
successes include:
- (a) The creation of six "centres of
expertise" - with cost effective transfers of staff from
internationally recognized sources,
- (b) Awarded status of "UK National Facility
for Ultra Precision Surfaces",
- (c) Having helped to attract some £20
million of research council funded projects into Wales,
- (d) Enabling the relocation of internationally
recognised academics into Wales,
- (e) The establishment of IP generating alliances
and programmes with UK National and International Universities,
- (f) The generation of several new business
ideas being taken forward as candidates for the incubation centre,
most of these based on internal IP,
- (g) Being selected by the Engineering and
Physical Sciences Research Council (EPSRC) to host the first "Integrated
Knowledge Centre". This programme provides some £7 million
of funding over five years which will be match funded by industry
to deliver leading edge product developments based on precision
surface engineering,
- (h) A rapidly expanding client list of internationally
significant corporations,
- (i) The establishment of an International
Corporate Partner Programme with an annual two day Strategic Conference,
- (j) ISO 9001 accreditation,
- (k) Awarded "New Business Incubator
of the year" (2007) by UK BI,
- (l) A track record in co-ordinating and winning
both UK DTI funded and EU funded collaborative programmes to the
benefit of our collaborating partners,
- (m) Recognised by the EU with a Regiostars
Award as the best ERDF-funded project in its class.
23. MANAGEMENT
MODEL
24. The OpTIC experience shows that a professional
management team, with industrial experience, is well-equipped
to make a TIC operate. At OpTIC, the team focused on making a
surplus (through a Company Limited by Guarantee) that was re-invested
in the business.
25. The principles of management for a TIC do
not have to be entirely dependent on the specific technology.
It is true that each area of science and technology has different
routes to market, but the management processes can be similar
in many ways. Thus the management model used at OpTIC can be adapted
successfully to the TICs. The principles are not dissimilar from
those in the book "The Art and Science of Technology Transfer"
by Phyllis L Speser (2006).
26. The management model for OpTIC was entirely
different from that of the Techniums across Wales. It was established
by an experienced team of successful managers and entrepreneurs
who brought their experience, insights, flexibility and drive
to the task of successfully managing technology transfer.
27. As evidence of the importance of the right
management approach, we offer comments from Andrew Davies AM,
the former Economic Development Minister in Wales. In reflecting
on the failure of most of the Techniums, he acknowledged, recently,
that "The weaknesses of the Technium concept have been identified
over many years. Audit reports on it have said it is very good
in principle but delivery is poor." (Western Mail). He continued,
"There was no strategy for the roll out of Technium and it
was flawed in terms of its day-to-day management." Management
was, in some instances, carried out by large, commercial, service
providers or by bodies close to University technology transfer
offices. In all cases, as Andrew Davies observed, the management
model was flawed.
28. It is therefore important that the Committee
pays particular attention to the quality and type of the management
of any TIC. Hauser also makes this point (recommendation 7).
29. IP MODEL
30. The IP model used by the Fraunhofers in Germany
has been found to be difficult for some major companies to accept.
In discussion with Schott Glas, they said that they had stopped
working with the Fraunhofer Institutes for this reason, (comment
made during DTI study tour in 2000).
31. Other major companies often find that the
Fraunhofer Institutes are becoming competitors, using their public
sector funding to provide highly competitive costing in tendering
for projects.
32. Hauser makes the point that commercialisation
of IP should be a core part of the activity of a TIC. Care should,
therefore, be given to an appropriate and fair IP strategy within
the TICs. The Lambert model for IP management in collaborative
R&D projects has been found to be successful and has been
adopted by the Technology Strategy Board (TSB), for example, for
their collaborative R&D competitions.
33. The next sections address the terms of reference
of this enquiry, drawing on the OpTIC experience.
34. Issue 1: What is the Fraunhofer model
and would it be applicable to the UK?
35. A "model" of an organisation is
a complex entity and comprises many elements; the most significant
being: ethos, funding, and management.
36. The fundamental ethos is for successful "knowledge
transfer". Fraunhofer Institutes focus on applied research,
"near to market". They are not research-driven;
they respond to market needs (and are often competing in the market
place against other organisations).
37. Achieving the Fraunhofer ethos in the UK
is certainly a worthwhile aim, however it is unlikely to be achieved
through conventional academic institutes. A different starting
point is needed.
38. A TIC, in the sense of "improving commercialisation
of research in the UK", requires a different ethos from either
a Fraunhofer or an academic institute. On this issue, we differ
from Hauser.
39. The funding model for Fraunhofer Institutes
is dependent on contributions from Federal and Regional Government.
One third of their funding is provided directly by the state.
Further state funding is received through research grants, in
open competition with universities - this can be up to a further
one third. The final third of their funding comes from commercial
contracts.
40. The Fraunhofer funding model will be difficult
to achieve in the UK It implies a significant commitment from
the State for both the initial set-up period and to ensure ongoing
budget levels which would be in excess of the current research
budget. Different funding models need to be explored for the UK.
Hauser suggests some approaches; our experience suggests there
are more productive models.
41. During the period leading to the formation
of OpTIC and the awarding of the contract, the management of the
Fraunhofer organisation visited St Asaph and discussed, in detail,
the operational model of the OpTIC. Eventually, they concluded
that they could not operate a model without the ongoing funding
stream being underpinned by government by at least one third of
its annual value.
42. During the tendering process, the WDA had
discussions with one company that subsequently decided to withdraw.
This company clearly understood the operating model proposed for
OpTIC and had concluded that a profit-oriented business could
not both make its own profit target, and ensure a surplus to guarantee
a sustainable future business.
43. As stated earlier, the management approach
is important. In a Fraunhofer, the management tends to be more
academic than commercial. Managers and Directors largely come
from an academic background although senior administrators may
be commercially trained.
44. It is unlikely that more commercial funding
models are achievable with a largely academic management team.
A more commercial approach is essential, as described earlier
in this submission and by Hauser.
45. Issue 2: Are there existing Fraunhofer-type
research centres within the UK, and if so, are they effective?
Many academic institutions perform their "Third Mission"
activities through contract research work as well as attempting
spin-outs. These are done, however, with different objectives
to those of TICs.
46. Issue 3: What other models are there for
research centres oriented toward applications and results? As
has already been demonstrated, the model for the OpTIC is better
suited to the objectives for the TICs than either the Fraunhofer
model or technology transfer offices at academic institutions.
47. We recommend that TICs should be established
in a manner that is recognised by EPSRC as appropriate for funding.
This is described in the OpTIC model (see para 19).
48. Issue 4: Whose role should it be to coordinate
research in a UK-wide network of innovation centres? For the UK
to gain maximum benefit from the TICs, a collaboration model should
be adopted so that the management teams should be autonomous but
willing to share best practice between each Centre. We would recommend
a Steering Committee comprising the Directors of each Centre,
the TSB (also representing the Knowledge Transfer Networks), as
well as senior members from industry who can advise on the effectiveness
of the TICs. We agree with Hauser on this (recommendation 2).
49. Any TIC Steering Committee should be mindful
of the operational differences between the TSB (a facilitating
organisation) and a TIC (an enabling organisation).
50. Issue 5: What effect would the introduction
of Fraunhofer-type institutes have on the work of Public Sector
Research Establishments and other existing research centres that
undertake Government sponsored research? Our answer to this question
presumes that the term "Fraunhofer-type" refers to the
potential TIC model.
51. Our view is that the roles of Public Sector
Establishments will be enhanced. TICs will be potentially collaborative
partners in developing new work that can move forward into the
market place. The research establishments will have more freedom
to explore areas of curiosity-led research that is often where
new directions for technology emerge.
52. Since the purpose of a TIC will be on improving
commercialisation, their approach will be different from that
of the existing research centres. That is not to say that they
may not share facilities, but the management objectives will be
different. As we noted before, on this issue, we have a different
view from Hauser - based on experience.
53. ADDITIONAL
ISSUES
54. Any TIC will need to be able to work closely
with the academic sector and industry. The management team should
be drawn from the commercial world, with experience working with
the academic sector.
55. Any TIC will need to form strong links with
EPSRC, the Technology Strategy Board, and the relevant Knowledge
Transfer Networks (KTNs) - across relevant areas of technology
and common scientific research (including European Framework programmes,
e.g. FP7). These organisations provide strategic direction for
the UK's technology development, while the Technology Innovation
Centres provide one route for the successful adoption in the market
place.
56. Each TIC should form close links with the
relevant industry associations for its sector. Engaging with industry,
and doing so effectively from the start, is key to success for
a TIC.
Dave Rimmer, Director,
DREM Ventures Ltd
Trefor Jones, Non-Executive Chairman of Optropreneurs Limited
from 2004 to 2009
Geoff Andrews, Chairman, Pinacl Solutions UK Ltd.
Antony Hurden, Independent Consultant, Grounded Innovation
Ltd.
30 November 2010
BRIEF BIOGRAPHIES AND STATEMENT OF INTEREST
The team making this submission was deeply committed
to the setting-up and success at OpTIC. The roles each team member
held in OpTIC and other interests are set out below. For the avoidance
of doubt, none of the team is currently involved with the management
of OpTIC or any other similar institute.
Dave Rimmer
Director, DREM Ventures Limited
Managing Director and CEO of Optropreneurs Ltd, the
management company responsible for setting up and successfully
operating the OpTIC Technium, from 2003 to 2009. Prior to this
he held a number of senior industrial appointments and has worked
in the UK and France. His background is in manufacturing and engineering
management and he has considerable experience in product design,
technology transfer, and new product introduction. Through DREM
Ventures he currently works with entrepreneurs and investors to
optimise the potential of new business opportunities. He is currently
a member of the STFC Central Laser Facilities Board.
Trefor Jones CBE, LL
Retired in 2001 as Chairman and Chief Executive of
Pilkington Optronics - a £150 million business in optoelectronic
products and systems. He held this post for 10 years having played
a major role in its formation and development. He has over 40
years of experience in high technology businesses. As non-Executive
Chairman of Optropreneurs Limited from 2004 to 2009 Trefor brought
this experience to the formation a strong industrial based Board
which provided key practical advice and strategic direction for
the creation and operation of the OpTIC Technium. In addition
to his industrial responsibilities, Trefor has also held the post
of Deputy Chairman of the Welsh Development Agency, Chairman of
the CBI Wales, Chairman of the Training and Enterprise Council
for North West Wales, and has also been Chairman of the Conwy
and Denbighshire National Health Trust.
Geoff Andrews
Chairman, Pinacl Solutions UK Ltd
Former Director of Optropreneurs Ltd. Currently Chairman
of Pinacl Solutions UK Ltd, a £12 million business employing
over 100 people and working in information technology solutions
throughout the UK. Geoff was one of the founders of OpTIC and
ran the Business Incubator for four years. Geoff is also a business
angel and since leaving OpTIC has invested in one of the high
tech businesses located in OpTIC, namely View Holographics Limited.
Antony Hurden
Director, Grounded Innovation Ltd.
Before creating Grounded Innovation, Antony Hurden
worked for 15 years at one of Cambridge's business and technology
consultancies (Scientific Generics, later Sagentia), following
20 years working in engineering companies taking ideas from the
laboratory into the market place. His experience includes the
management of technology development within large multinationals
(Xerox), medium-size companies (W. Vinten Ltd.), and within a
small engineering company as Technical Director.
In his consulting career, he worked on the development
of the strategy for OpTIC and was also seconded to be part of
the management team in the start-up phase He has also worked with
a range of private sector companies, public sector organisations
(at both RDA and national levels), as well as various universities.
He has been working with the Electronics, Sensors, Photonics Knowledge
Transfer Network as a sub-contractor.
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